Courtesy of Susie Kirgan, American Financial Network
Americans are living longer, which is great news. But with that comes the challenge of ensuring you are sufficiently prepared for your financial future.
Accessing home equity is a solution that is becoming more important now as retirement needs are growing and the typical sources of retirement funding may not be enough.
A reverse mortgage loan just might be the help you are looking for. This viable financial tool can help older Americans tap into home equity to help fund a more comfortable and secure retirement.
Home Equity Conversion Mortgages (HECMs), also known as Reverse Mortgage Loans, were created over 25 year ago to help Americans age 62 and older convert a portion of their home equity into tax-free money to improve their lifestyle in whatever way they choose.
HECM Reverse Mortgages are insured by the Federal Housing Administration (FHA) and allow seniors to age in place and achieve retirement security.
With a reverse mortgage loan, borrowers do not make monthly principal and interest payments on the loan.
Instead, the loan balance is typically repaid when the last borrower or eligible non-borrowing spouse leaves the home or does not otherwise comply with loan terms.
Borrowers are responsible for paying taxes, homeowners insurance, HOA dues (if any), maintaining the property and complying with all loan terms.
Not complying with all loan terms can result in defaulting on the loan and the borrowers can be subject to foreclosure.
Also with a reverse mortgage loan, lenders do not establish escrow accounts to pay for property taxes and homeowners insurance.
You can manage your finances so loan proceeds or other funds are available to pay for these expenses.
Alternatively, a set aside account can be established to pay for tax and insurance obligations and borrowers can fund this account from their reverse mortgage loan proceeds.
Common uses of a reverse mortgage loan:
(1) pay off an existing mortgage (required as part of the loan) and eliminate monthly mortgage payments;
(2) make retirement savings last longer;
(3) use a “standby” HECM reverse mortgage growing line of credit to preserve investment accounts during market downturns or build a safety net for unplanned emergencies, home repairs and healthcare expenses;
(4) supplement your retirement income with monthly payments;
(5) use a HECM for purchase loan to buy a home that better fits your needs; and
(6) support aging in place expenses, like caregiving and home modification.
Five advantages of HECM Reverse Mortgage:
(1) no monthly mortgage payment;
(2) tax-free loan proceeds;
(3) keep your home;
(4) Federally-insured by the government; and
(5) delay your Social Security benefits. HECM product guidelines were put in place by the United States Department of Housing and Urban Development (HUD) to protect borrowers and further strengthen the HECM reverse mortgage loan product.
A number of consumer safeguards have been established to protect reverse mortgage borrowers.
These protections ensure that lenders are doing their jobs right, and that you and your family have a thorough understanding of how a reverse mortgage loan works.
All reverse mortgage applicants undergo independent, third-party HUD-approved counseling. This ensures that borrowers understand the financial implications associated with their reverse mortgage, what their obligations are and what other alternatives may be available to them.
For more information on Reverse Mortgages you can call Susie Kirgan, in Fairfield, Mortgage Loan Officer, NMLS # 956762, at 903-389-3852, or cell phone 713-301-6436.